Partnership do's and don'ts
By Julie Gelbwaks Gewirtz
Gelbwaks Executive Marketing Corp.
The expansion of LTCI Partnership availability throughout America has been a welcome opportunity for most. Since the Deficit Reduction Act (DRA) of 2005 was passed, we now have partnership in more than half of all states. As a quick refresher for those who are not aware of what LTCI Partnership is all about, here is the general concept: A consumer purchases a Partnership Qualified Long Term Care insurance policy. In this example, we will say it is worth $300,000. The insured goes on claim many years later and runs through her entire $300,000, but she still needs care. She applies to Medicaid and gets approved as a Medicaid recipient, but is allowed to preserve $300,000 of her own assets because she has a Partnership-Qualified policy. Normally, in order to become a Medicaid recipient, you must be in a situation where you have very few assets to your name.
Although there tends to be much confusion surrounding the details and requirements, LTCI Partnership plans are truly a win-win for all involved. They are advantageous for the state Medicaid programs, since more people will buy insurance coverage and not need to end up receiving Medicaid dollars at all. And they're a bonus for the insurance carriers because more people will buy LTCI policies due to the fact that they now include this extra safety net on the back end for free. They are good for insurance agents because they all now have something positive and new to discuss with the prospects out there. And, last but definitely not least, they are a positive thing for the consumers, since they can now buy the same policy they might have purchased in the past, but with an added benefit at no additional cost.
Please note that Partnership plans were originally set up as pilot programs in four states approximately 15 years ago. These four states are New York, California, Connecticut and Indiana. Through the DRA, Partnership expansion across the rest of the country became possible. But, the original four states were grandfathered and, therefore, have completely different rules and guidelines when compared to what we call the "post-DRA" Partnership states.
Now that we have that out of the way, let's focus on some very important points that you, as an advisor, must understand when selling these plans in the post-DRA states. I have listed three do's and three don'ts that should help you through the process:
1. Do get certified to sell Partnership in your state. The NAIC guidelines say that agents must take an eight-hour Partnership certification class in addition to a four-hour "refresher course" every two years thereafter to renew it. For details on what your particular state requires, you can go to www.clearcert.com, which is a national clearinghouse for this type of data. The information is easily accessible and there is no cost to agents. Also, many carriers require that in order to sell long term care insurance at all, you must have your Partnership certification training -- whether you plan to sell Partnership policies or not.
2. Do sell products from carriers that have had their Partnership filings approved. Although most companies will eventually get Partnership filed and approved, you are safest if you choose to sell the products that have been launched in your state. This is simply because the guidelines for client exchanges after the fact are confusing and cumbersome.
3. Do tell your prospects that if they purchase the required inflation type, they will get a Partnership plan -- whether they want it or not. As long as you are selling through a carrier that has approved Partnership plans in your state, the clients will get a Partnership Qualified LTCI policy if they buy inflation based on the state guidelines. The DRA stated the following: those younger than age 61 must buy some form of automatic compounded inflation, ages 61-75 must buy some form of automatic inflation (but compounding is not required), and ages 76 + are not required to buy inflation. Most states have accepted those parameters, but check to make sure you understand your state rules before selling.
1. Don't sell Partnership as a golden ticket to Medicaid. This is not a sure thing in any way, shape or form. In order to become a Medicaid recipient, there are multiple tests that must be passed including asset, income, home equity and medical needs. Partnership LTCI plans only help satisfy the asset piece. So, there is a good chance that a person may apply for Medicaid and be rejected. In addition, who knows if Medicaid will even exist 30 or 40 years from now? This is just an added feature that gives your client a possible opportunity in the future. And it is free, so how could it be bad?
2. Don't plan to become an expert on Medicaid in your state. Although you are required to learn many of the in and outs regarding your state's Medicaid rules when you take your certification course, you are not a Medicaid expert. There are elder law attorneys that do this for a living and you should send clients to them for planning on that front, if need be. In addition, the rules and laws are constantly changing, so what you tell your clients today may have absolutely no bearing on what will happen to them at claim time -- hopefully many years from now.
3. Don't assume that Partnership is for everyone. It isn't. There are many people out there who have no interest in this whatsoever. They may never want to become a Medicaid recipient (even if they can preserve some assets in the process). They may know now that they will never qualify in the future because of income, home equity or some other reason. Partnership, in my opinion, is a product for the masses. For Middle America, not for the very affluent, in most cases. But remember, if they happen to purchase the right type of inflation based on age, they will get the benefit either way --and it certainly can't hurt.
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